The New Hampshire State Senate passed the Granite Caregiving Act, a bill that would create a statewide paid family and medical leave program. That’s great news for working women and families struggling to get by, right?
Undoubtedly, the state-level paid leave program was crafted with the best intentions, but in reality it will harm those it seeks to help.
The plan would offer workers welcoming a new child, caring for a sick family member, or facing their own serious illness benefits that replace 60 percent of their wages for up to 12 weeks. That sounds generous, but most lower-income workers can’t make ends meet on 60 percent of their pay, and ultimately will be less likely than middle- and upper-income families to take the benefit.
That’s what has happened in California, where the median income of mothers who took paid leave following the birth of a child was about $10,000 higher than the median income of the general population. More than 20 percent of beneficiaries in the California program had incomes in the highest income brackets, while less than 4 percent had incomes in the lowest income brackets.
The same is true with European family leave programs. Economists at the University of California concluded that Norway’s paid leave program led to a “pure leisure transfer to middle and upper income families … at the expense of some of the least well off in society.” Studies show similar results in the United Kingdom, Sweden, Iceland and Belgium.
New Hampshire residents should also be aware that, if it becomes law, this new state-level program will encourage employers that currently offer their own leave benefits to drop them. The law would require employers to participate in the new plan unless they have a benefit program judged equal or superior to it. That means a company currently offering full pay but only for six or eight weeks might drop those benefits entirely, leaving some workers with longer but less generous benefits. Many workers, particularly those who can’t afford to use the lower benefits, will be left worse off.
All workers would be hit by the new payroll tax that would be imposed to fund the new program, but the .5 percent reduction in pay will be felt most by those struggling to get by. Such payroll taxes are always billed as modest, but add up for low-income workers living paycheck-to-paycheck. Moreover, taxpayers should be warned that initial estimates of how much open-ended entitlement programs will cost often end up being far too low and are exceeded by actual spending. New Hampshire taxpayers should prepare for lawmakers to soon be back asking for more taxes.
There are better ways to help New Hampshire residents who lack paid leave benefits. First, the good news is that employers are increasingly offering employees paid leave benefits, including for lower-income and hourly workers. Lawmakers should recognize that a good economy and better business climate creates jobs, higher wages, and better benefits for workers, so that should be priority number one.
New Hampshire could also support efforts at the federal level, led by Senators Romney, Rubio, Ernst and Lee, to reform Social Security to give workers the option to access Social Security “earned leave” benefits after the birth or adoption of a child in exchange for pushing back their date of eligibility for retirement to make up for those costs. That federal effort would target support to those who really need it, but without burdening taxpayers, shifting costs to workers who don’t want or need paid leave benefits, or encouraging employers from dropping their existing benefits.
The Granite Caregivers Act sounds compassionate, but in practice it would backfire on those who need help most. New Hampshire should reject this approach.